E-Alert Case Updates

Magnuson-Moss Warranty Act Claim Required to be Submitted to Binding Arbitration Under Rental Agreement

Christine Seney et al. v. Rent-A-Center, Inc., et al.
Case No.: JKB-12-2347 (U.S. District Court for the District of Maryland, December 18, 2012)
by Eric M. Leppo, Associate
Semmes, Bowen & Semmes (www.semmes.com)

In this recently issued opinion by Judge James K. Bredar of the United States District Court for the District of Maryland, the Court granted Rent-A-Center’s Motion to Dismiss, and enforced the arbitration provision of the parties’ rental contract holding that the Defendant was entitled to have the claim submitted to binding arbitration.

Christine Seney and her husband, individually and as parents and next friends of their children I.S. and N.S., filed this suit in Maryland state court against Rent-A-Center, Inc. (“RAC”). The Seneys’ suit arose out of their rental of a wooden trundle bed and two (2) mattresses from RAC for use by their children. Shortly after the Seneys received the beds, their children began to have itchy bites and rashes, it was determined that the mattresses and bed were infested with bed bugs. RAC replaced the bed and mattresses, but did not pay for pesticide treatment of the entire house and medical bills claimed by the Seneys.

The Seneys filed a one-count Complaint asserting breach of express and implied warranties under the Magnuson-Moss Warranty Act (“MMWA”) and claimed $300,000.00 in damages. RAC removed the matter to Federal Court and filed a petition to enforce an arbitration provision in the contract, and seeking dismissal of the suit.

The Court first noted that a District court must grant a petition to compel arbitration where a valid arbitration agreement exists, and the issues presented in the case fall within the scope of that agreement. Adkins v. Labor Ready, Inc., 303 F.3d 496, 500-01 (4th Cir. 2002). The Court then noted that the parties’ disagreement in this matter was limited to one of whether the arbitration provision covers the dispute at issue. Specifically, the Seneys acknowledged an arbitration provision in the contract, but argued it did not require them to arbitrate their MMWA claim.

The Federal Arbitration Act (“FAA”) was intended to “revers[e] centuries of judicial hostility to arbitration agreements,” to permit parties to avoid “‘the costliness and delays of litigation,’ and to place arbitration agreements ‘upon the same footing as other contracts.’” Scherk v. Alberto-Culver Co., 417 U.S. 506, 510-11 (1974). The MMWA was enacted in 1975 and is codified at 15 U.S.C.A. § 2302. It encourages warrantors to establish informal dispute settlement mechanisms and allows warrantors to require consumers to resort first to such mechanisms before pursuing any legal remedy granted by the MMWA Section 2310(a).

The Court noted that there was no question that the Seneys’ rental agreement with RAC contained an arbitration agreement, and unmistakably covered statutory claims arising out of the Rental-Purchase Agreement. The Seneys argued, however, that the MMWA superseded the FAA pointing to § 2310(d)(1), which grants a right to sue in either state or federal court for damages or other relief, as “plain language” that indicates an intent to preserve a consumer’s right to bring a lawsuit for breach of written or implied warranties.

The Court disagreed that the MMWA’s provision for judicial enforcement trumps the FAA, as nothing in the MMWA’s text expresses an intent by Congress to preclude binding arbitration as a means of resolving disputes under that statute. Moreover, the mere statutory specification that a consumer may pursue a right of action in a judicial forum does not per se preclude a waiver of judicial avenues in favor of resolution of a claim through arbitration. As such, the Court concluded that MMWA claims can be subject to arbitration through a valid provision that requires arbitration of statutory claims.